@techreport{NBERw7536,
title = "Strategic Trade Policy with Endogenous Choice of Quality and Asymmetric Costs",
author = "Dongsheng Zhou and Barbara J. Spencer and Ilan Vertinsky",
institution = "National Bureau of Economic Research",
type = "Working Paper",
series = "Working Paper Series",
number = "7536",
year = "2000",
month = "February",
doi = {10.3386/w7536},
URL = "http://www.nber.org/papers/w7536",
abstract = {This paper examines the strategic trade policy incentives for investment policies towards quality improvements in a vertically differentiated exporting industry. Firms first compete in qualities and then export to a third country market based on Bertrand or Cournot competition. Optimal policies are asymmetric across the two producing countries. Under Bertrand competition, the low-quality country subsidizes investment to raise export quality, while the high-quality country imposes a tax so as to reduce the quality of its already high quality exports. Under Cournot competition, the results are reversed with a tax in the low-quality country and a subsidy in the high-quality country.},
}